Transcript Accra conference presentation - Peter Chowla

Financing the Sustainable Development Goals
International Conference, Accra, Ghana
18 March 2015
Peter Chowla,
Financing for Development Office, UN DESA
All views expressed are personal and should not be considered as the views of the United Nations.
Challenges
International tax cooperation
Needs and flows


Caveats
Water & sanitation
◦ Extra $100 billion annually in capital costs

Education
◦ Extra $100 billion annually

Health
◦ Extra $50-$80 billion annually

Sustainable Energy
◦ Access: $50 billion annually
◦ Sustainability: $500 billion annually (all countries)
 To
fill these gaps, public, private, domestic, and
international financing needed
 Even if 0.7% were reached, ODA alone wouldn’t
be sufficient.
 At the same time, the private sector which is
profit-oriented is
◦ Particularly appropriate for productive investment
◦ But unlikely to invest sufficiently in social needs, global
public goods where risk-adjusted returns are not high
 Different
financing flows are complements, not
substitutes, as they have different roles and
objectives
($ billions)
2011
2012
2013
2014
African
direct
investment
41.8
35.0
40.0
41.0
African
portfolio
investment
-11.7
3.5
8.9
-0.1
African other -9.3
net
investment
22.3
-73.1
-17.6
Net Private
Flows
60.8
-24.2
23.3
20.9
Revenue in an age of globalisation




Domestic revenue is the largest and most
reliable source for investment in sustainable
development
International rules, policies and cooperation
often limit what Governments can raise as
domestic revenues
There is no agreed definition of IFFs:
commercial tax evasion, criminal activity,
corruption – domestic and international
Estimates of untaxed off-shore wealth: $6
trillion - $32 trillion

At the domestic level: tax administration
◦ Skills and capacity gaps
◦ Regulatory capture

At the international level
◦ Method of allocating economic activity
 Transfer mispricing – particularly intangibles
◦ Tax competition between jurisdictions
◦ Fiscal transparency rules

Distributional implications
◦ Domestic & international businesses
◦ State & business
◦ Amongst states

Political economy of intergovernmental
negotiations
◦ Most MNEs are hosted in OECD countries
◦ Incentives for policy makers are skewed

Participation of developing countries in
reforms

Assistance for tax capacity building
◦ Optics – substitution for ODA and other
finance

Venue for tax policy making
◦ Roles of the UN Committee of Experts on
Tax Matters, OECD, Global Forum
Definitions and data
 Fiscal transparency implementation

◦ Multilateral convention?
◦ Delayed reciprocity?

Alternatives to whole transfer pricing reforms
◦ Unitary taxation
◦ Innovative policies – standardised transfer pricing
◦ Cooperative auditing
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

UN Convention Against Corruption
Stolen asset recovery
Combatting environmental crimes
Overall it speaks to coherence questions:
◦ Global economic governance structures
◦ Follow-up process
Original sin, contagion


Total debt securities rose from 13% of GDP in
1994 to 54% of GDP in 2010 in upper middle
income countries (Laeven 2014)
Local public debt changes
◦ Upper MICs: 8.1% -> 31.3%
◦ Lower MICs: 35.0% -> 29.2%

Local private debt changes
◦ Upper MICs: 2.4% -> 13.3%
◦ Lower MICs: 0.9% -> 1.6%

The share of local currency denominated
bonds in US investor portfolios has grown
from about 2 per cent in 2001 to about 37
per cent in 2011
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
Exchange rate risks
Portfolio flow volatility
Availability of capital to SMEs and domestic
business
Market size problems
Debt versus equity driven markets




Macro-prudential regulatory framework –
matching this to national needs and
situations
Capital account management tools
Striking the right balance between stability
and capital availability
Environmental, social & governance risks
◦ Corruption may not be the biggest problem given
global systemic risks

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Support for local capital markets or access to
international capital
Appropriateness of Basel III regulations
Restrictions on capital account management
contained in investment and trade treaties
Harmonisation of ESG frameworks
Regional integration policies
A FLOW OF FUNDS FRAMEWORK
Domestic Enabling Environment and Policy Framework
Intermediaries
Sources*
National
public
sources
National
private
sources
International
public
sources**
International
private
sources
Public institutions, e.g.
• Governments
• National and regional development
banks
• Bi- and multilateral aid agencies
• International financial institutions
Goals and
Uses
Instruments, e.g.
 Domestic public
spending
 Grants
 Subsidies
 Loans
National
(e.g. poverty/social needs and
investments in national development)
 Concessional
 Non-Concessional
Blended institutions, e.g.
• Innovative partnerships, e.g. Global
Health Funds, potential public-private
infrastructure funds
 PPPs
Environmental
Economic
 Guarantees
Private investors
Investors with
long-term
liabilities, e.g.:
Investors with shortand medium term
liabilities, e.g.:
• Pension funds
• Life insurance
• SWF
•
•
•
•
Banks
Cooperative banks
Mutual funds
Hedge funds
 Bank loans
 Money markets
 Bonds
Social
 Equities
 Derivatives
and direct investors
International Enabling Environment
(including fair-trading system, macroeconomic stability,
systemic issues, etc.)
International
(e.g. global public goods)